Entries Tagged as 'Debt Reduction'

Super Failure

November 21st, 2011 at 3:32 pm 62 Comments

“Failure is not an option.”

“Well, clinic maybe it is.”

Such sums up the work of the Joint Select Committee on Deficit Reduction (JSC) formed last August with the task of finding $1.2-1.5 trillion in deficit savings during the next decade.

Some sort of cobbled-together semi-deal may emerge from talks Monday afternoon, cialis sale but it will be far from $1.2 trillion in real savings. Worse, JSC’s abject failure leaves Congress with a 45 day period in which to address or postpone serious issues.

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America’s Debt Will Get Kicked Down the Road

October 25th, 2011 at 12:00 am 27 Comments

While much of Gucci row wonders what the Joint Select Committee (JSC) will do to their client’s specific interests, shop the more objective analysts seem to be split into three camps—just like they were in mid-August when the JSC was created by the Budget Control Act.

In short, nobody knows what will emerge, not even the 12 members of the JSC.

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No Super Democrats On This Committee

August 10th, 2011 at 11:27 am 35 Comments

How can we explain the Democrats who have been appointed to serve on the Joint Select Committee? (Commonly known as the ‘Super Committee.’)

Let’s play political “Jeopardy.”

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IMF To Congress: Time For A Debt Deal

June 17th, 2011 at 11:33 am 15 Comments

Last evening, participants in the “Biden Budget Talks” leaked that the group seeks now $4 trillion in debt reduction during the next 10-12 years.Yet, reports proliferate that Medicare, Medicaid, perhaps Tricare, and Social Security are off-limits.

The arithmetic doesn’t work if the rumors are true.

More likely outcomes will be along these lines:

  • Small changes to non-medical, non-Social Security, entitlements (pensions, farm subsidies, etc.);
  • Assumption of a freeze of some length on domestic appropriated accounts (12-14 per cent of federal expenditures);
  • “Process” changes that will create the promise of automatic spending cuts in the future in Medicare, Medicaid, defense spending and tax expenditures.

We will be very pleasantly surprised if the Biden talks produce fundamental re-structuring of the nation’s fiscal mess. Not only is time running out for a comprehensive legislative package that reforms Medicare and Medicaid (the greatest drivers of future fiscal collapse), but it is not in the self interest of Democrats in general to produce meaningful Medicare reform when so many of them in the House and Senate want to use it as an attack tool against their Republican opponents in the 2012 election cycle.

Our reaction is similar to that of Senate Budget Committee Chairman Kent Conrad earlier this week when he expressed his fear that the Biden talks would produce nothing of substantial fiscal consequence.

Conrad has been around the budget block many times and he can sniff out a bad deal when he gets near one. As for the “pledge” that spending cuts will be three times bigger than any revenue changes, history presents a lesson. Way back in antediluvian times (the mid-’80s), Congress promised then President Ronald Reagan that it would produce three dollars of spending savings for each dollar of tax increases. The actual package was more like one for one when all the gimmicks and spin were squeezed out of the package and people who knew Reagan best said that he knew after the fact that the numbers were phoney.

The recent admission of reality by the American Association of Retired Persons (AARP) that Social Security and Medicare really are on the reform block is good news. AARP wants to have a seat at the table in the post-2012 election world when Congress may get serious about such entitlement reform. Its traditional opposition to any changes in entitlements has been a huge stumbling block to progress on the fiscal front; indeed, one can make a pretty strong case that the spending indulgence for seniors that will flood the nation in coming years occurs because of the counter-productive actions of AARP.

Someday not far off, real entitlement reform will force itself onto the Congressional agenda. It won’t be this year nor next. It may well be 2013. And, given turmoil in overseas markets and economies, America may continue to be blessed by strong demand for the “safe haven” of our sovereign debt.

But the patience of credit markets is not eternal. At some point market participants will demand real changes in American debt accumulation. That demand could be in the form of very unpleasant interest rates demanded on our sovereign debt.

Market patience concerns not just serious American policymakers.  This morning, the International Monetary Fund warned both the Europeans and Washington, D.C., that “they are playing with fire” unless they take immediate steps to reduce deficits.

Jose Vinals, director of the IMF’s monetary and capital markets department, continued:  “You cannot afford to have a world economy where these important decisions are postponed because you are really playing with fire.  We have now entered very clearly into a new phase of the crisis, which is, I would say, the political phase.”

In addition, the IMF’s new economic forecast predicts slower global and American economic growth in the next 18 months than its original forecast. Slower growth, higher unemployment, increasing spending, less revenue — no wonder most Americans who live outside Washington, D.C., have so pessimistic a view of the future and so little faith in the federal government.

Our view is that if the Biden talks produce the minimal result we predict, Director Vinals’ fears will materialize more quickly and perhaps more dramatically than most Americans anticipate.

Obama: I’ll Cut $4 Trillion

April 13th, 2011 at 1:14 pm 110 Comments

Full speech transcript here.


This didn’t feel like a policy speech, even though it was sprinkled with policy ideas. The main focus and the meat of the speech came from Obama’s attack on the Ryan plan and the Ryan budget.

This felt like a rehearsal for 2012. The assumption is that whoever the GOP nominee is, that they will have to run on defending the Ryan budget, and that what the GOP wants to do is sacrifice old people in a draconian way to balance the budget.

Many on the both the right and the left have been hoping for these sorts of explicit comparisons to be made, both believe they can win on these issues.

There were hints of triangulation language, but Obama is not going to make running against his own party a key part of his campaign message.


Obama lays out his timeline, Biden will start meeting with congressional leaders and aim to get a proposal of out by June.

That might be optimistic.

Obama closes off arguing that even those who disagree with him at least want to do the right thing for the country. Pointed and strong critiques of the Ryan plan stills stand.


Liberals can be happy with his line on tax cuts: “I don’t need another tax cut, Warren Buffet doesn’t need another tax cut.”

But Obama does some triangulation, notes that some in his party don’t wan’t to cut spending at all in. Obama doesn’t really critique this wing of the party beyond saying [paraphrasing] “we have to do something about this problem.”

So there goes the Krugman endorsement.

Here is the comment from the speech itself:

But doing nothing on the deficit is just not an option.  Our debt has grown so large that we could do real damage to the economy if we don’t begin a process now to get our fiscal house in order.


In the tax section, Obama states that he like some tax exemptions, such as the ones that let you own a house, but he doesn’t like the ones that millionaires and billionaires use.

This is not ideal policy. Not good for a President to come out and say “I am for subsidizing home ownership”.


Obama wants to have a Defense Department “review” of “America’s role in the world”. Coming after what has happened in Libya, this seems like this should lead to a much larger geo-strategic policy discussion. What are the reasons that the US will intervene in a foreign country? This is a question that wants a coherent answer.

On healthcare, Obama runs through a series of proposals for “reducing wasteful subsidies”, and also talks about “changing the way we pay for healthcare”. He also announces a new independent commission to look at ways to increase efficiencies.

Despite some of these policy proposals, much of Obama’s speech focuses on contrasting his efforts with Ryan and the GOP.


Obama: “There is nothing serious” about the Ryan tax cuts.

Says the Ryan plan is “not courageous” for making cuts to those who don’t have representation on capitol hill.

If the GOP wanted to compare and contrast their approach with Obama’s, then they got it. DNC operatives are probably very happy with this.


Obama begins laying into the Ryan plan, he is not mincing words. His focus is on medicare, describes the Ryan plan as a voucher program and argues that the GOP is essentially leaving old people without care in order to balance the deficit.

Again, more rhetorical ammo for liberals, but will they actually like his proposals?

As a side note, there are some odd rhetorical choices being made in the speech. Obama credits Brazil for having cars that run on ethanol, but that is not an entitlement problem, thats an agricultural policy problem. (One that Tom Coburn is trying to fix.)


Here are the lines that pundits will like: Obama says that foreign aid “takes up only 1% of the budget”. Obama goes on to state how entitlements and interest on the debt takes up most of the budget.

This is a section that liberal commentators are calling an “adult conversation” from the President.

Conservatives would likely point out that Ryan began tackling those sacred cows first, and more forthrightly.


Obama gives his speech a historical framing. Briefly summarized, the view is:

-In the 80′s we started to go into debt.

-So in the 90′s we got serious about it.

-But then in the 2000′s, we lost our way.

-And when I came into office, I had to spend to deal with the financial emergency.

It is a critique of Ronald Reagan and George W. Bush but Obama avoids calling them out by name, even though that is who he is referring to.

Obama gives a short explanation of why the problem should be solved, cites how in 2025, interest on the debt and entitlements crowd out all other spending. A similar point has been made by Paul Ryan.


Obama begins his speech by making the case for government as a means to deal with unforeseen externalities. Says Medicare, Social Security, Unemployment Insurance, etc. all are meant to deal with the unforeseen in people’s lives.

He says “We’re a better country because of these commitments.”

So that must be the necessary rhetorical bone to the left before he has to say how he plans to keep those programs financed.


Obama begins by citing the “outstanding” members of the fiscal commission who are in the audience. (Erskine Bowles and Alan Simpson)

An endorsement of their work? To prepare for endorsing some of their proposals?

(Update: Bowles-Simpson does not get cited by name in the speech.)


Sam Stein tweets at 1:43pm that “the presidential motorcade is making its way down penns. avenue right now.”


We will be liveblogging the President’s debt reduction speech from the FrumForum offices. The speech is expected to lay out a plan for entitlement reform coupled with tax increases. The speech starts at 1:30pm.

We will be watching to see how Obama will contrast his proposals with the GOP budget presented by Paul Ryan.

Details will be presented as they are made, but we already know that the President aims to cut $4 trillion from the deficit over 12 years.